Artificial intelligence is now woven into ordinary business operations: chatbots that answer customers, algorithms that screen job applicants, tools that set prices, and software that approves or denies transactions. When one of those systems causes harm—a discriminatory hiring decision, a defamatory chatbot answer, a costly automated error—the instinctive defense used to be that the machine acted on its own and no human is to blame. As of January 1, 2026, that argument no longer works in California. Assembly Bill 316, codified at Civil Code § 1714.46, provides that a defendant who developed, modified, or used an AI system may not avoid liability by asserting that the AI “autonomously” caused the harm.

This guide explains exactly what AB 316 does and does not do, who is exposed, the AI-related claims California businesses are already facing, and the concrete steps owners can take now to reduce their risk. For broader background, see our overview of the legal risks of artificial intelligence.

What AB 316 Actually Says

Signed into law on October 13, 2025 and effective January 1, 2026, AB 316 adds Section 1714.46 to the California Civil Code. The statute defines “artificial intelligence” as “an engineered or machine-based system that varies in its level of autonomy and that can, for explicit or implicit objectives, infer from the input it receives how to generate outputs that can influence physical or virtual environments.” It then provides that, in an action against a defendant who developed, modified, or used AI that is alleged to have caused harm, “it shall not be a defense, and the defendant may not assert, that the artificial intelligence autonomously caused the harm to the plaintiff.”

In plain terms: California has deleted the “the AI did it” defense. A company can no longer break the chain of responsibility by pointing at the technology as an independent actor.

The One Defense It Eliminates—and the Many It Leaves Intact

It is important to understand the precise scope of AB 316, because it is narrower than the headlines suggest. The statute removes a single argument. It does not create strict liability for AI-related harm, and it does not change the elements a plaintiff must prove.

Civil Code § 1714.46 expressly preserves every other defense. A defendant may still present evidence relevant to causation and foreseeability, may still assert other affirmative defenses, and may still introduce evidence of the comparative fault of any other person or entity. The traditional negligence framework continues to govern: a plaintiff must still establish a duty of care (Civ. Code § 1714(a)), a breach of that duty, causation, and damages. AB 316 simply forecloses one escape hatch—it does not hand plaintiffs an automatic win.

Who Is Exposed: The Entire AI Supply Chain

AB 316 reaches anyone who “developed, modified, or used” an AI system. That language sweeps in the whole chain: the foundation-model developer, the company that fine-tunes or customizes a model, the integrator that builds AI into a product, and—critically for most business owners—the enterprise that simply deploys a third-party tool.

If your business merely uses AI built by someone else, you are squarely within the statute. Common exposure scenarios include:

• Customer-facing chatbots that give incorrect, misleading, or defamatory information, or that promise terms the business will not honor.
• AI hiring and screening tools that filter out applicants in a way that produces a disparate impact on a protected group.
• Automated pricing or underwriting systems that produce discriminatory or deceptive outcomes.
• Generative content tools that publish infringing or false material.
• AI-assisted professional advice in finance, real estate, insurance, or healthcare contexts.

The Claims Businesses Are Already Facing

A key reason AB 316 matters is that plaintiffs are not waiting for AI-specific legislation. They are repurposing long-standing statutes to reach AI-related conduct, and AB 316 makes those suits harder to escape. California businesses should expect AI claims dressed in familiar clothing:

• Employment discrimination. Class actions allege that AI screening tools produce unlawful disparate impact, and plaintiffs have begun arguing that AI hiring vendors operate as unregistered consumer reporting agencies under the Fair Credit Reporting Act.
• Unfair competition and consumer protection. Deceptive AI outputs and undisclosed automated decision-making invite claims under the Unfair Competition Law (Bus. & Prof. Code § 17200) and the Consumers Legal Remedies Act.
• Privacy and wiretap theories. Plaintiffs deploy the California Invasion of Privacy Act and biometric-privacy theories against AI systems that capture or process user data.
• Defamation. A chatbot that “hallucinates” a false, reputation-damaging statement about a person or competitor can support a defamation claim.

The common thread: old statutes, new targets. AB 316 ensures the defendant cannot answer any of these claims by disclaiming responsibility for its own tools.

How AB 316 Changes Litigation Strategy

Before 2026, a defendant might have sought early dismissal by arguing that an unforeseeable, autonomous algorithm—not the company—caused the loss. That door is now closed. The practical effect is to push the fight away from “who acted” and toward “did the business act reasonably.” Litigation will increasingly turn on whether the company exercised sound judgment and control: Did it vet the tool? Monitor its outputs? Keep a human in the loop for consequential decisions? Disclose the use of AI where required?

This makes documentation the new battleground. A business that can show a deliberate, well-governed deployment is in a far stronger position than one that bolted on an AI tool and looked away.

Practical Steps to Reduce Your AI Liability

• Inventory your AI. Catalog every AI system in use and identify which business decisions each one influences. You cannot govern what you have not mapped.
• Keep a human in the loop. For consequential decisions—hiring, credit, pricing, safety, legal or medical guidance—require meaningful human review and record it.
• Vet and contract with vendors carefully. Demand representations about training data, bias testing, and legal compliance, and negotiate indemnification for AI-caused harm.
• Test for bias and accuracy, and keep the records. Periodic, documented testing is both good practice and powerful evidence of reasonable care.
• Disclose appropriately. Comply with California's growing body of AI transparency and disclosure rules, and tell customers when they are dealing with an automated system.
• Review your insurance. Confirm whether your general liability, professional liability, or cyber policies cover AI-related claims—many do not yet.
• Adopt a written AI-use policy and train employees on it.

Frequently Asked Questions

Q: Does AB 316 make my business automatically liable when our AI makes a mistake?
A: No. AB 316 is not a strict-liability statute. It removes the “the AI acted autonomously” defense, but a plaintiff must still prove duty, breach, causation, and damages. A well-governed AI deployment remains defensible.

Q: We only use third-party AI tools we did not build. Are we still covered by the law?
A: Yes. The statute applies to anyone who “developed, modified, or used” AI. Simply deploying a vendor's tool places your business within Civil Code § 1714.46.

Q: Can we still blame the AI vendor?
A: You can pursue the vendor through indemnification and comparative-fault evidence, and AB 316 preserves those rights. What you cannot do is tell the injured plaintiff that the AI itself—rather than any person—caused the harm.

Q: Does AB 316 apply to harm that occurred before 2026?
A: The statute took effect January 1, 2026. Its application to earlier conduct is a developing question; consult counsel about any pending or threatened claim involving AI.

Q: What is the single most effective protection?
A: Reasonable, documented human oversight, paired with careful vendor contracts and confirmed insurance coverage. Together they address both the liability and the proof problem AB 316 creates.

This article is provided for general informational purposes and is not legal advice.

Need help? Contact Kolmogorov Law, P.C. at (909) 235-6116 or visit kolmogorovlaw.com to schedule a consultation with our business litigation team in Irvine, California.